Renewable Portfolio Standards Ignore Cost Inefficiencies

March 1, 2012

Thirty-six states, including Massachusetts, have implemented renewable portfolio standards that require further state investment in renewable energy sources (primarily wind and solar). This form of policymaking ignores the cost inefficiencies of wind and solar power which, after decades of government support, are still not independently viable for broad commercialization, says Investor's Business Daily.

Wind provides only 1 percent of America's electricity, compared with 49 percent for coal, 22 percent for natural gas, 19 percent for nuclear power and 7 percent for hydroelectric.

Wind turbines generally operate at only 20 percent efficiency compared with 85 percent for coal, gas and nuclear power plants.

Wind energy also suffers from the inability to store its power for when the wind isn't blowing, contributing to its problem of inconsistency.

Massachusetts' offshore Cape Wind project is selling electricity to a utility company for 18.7 cents per kilowatt hour (kwh) -- double the average Massachusetts rate of 8 cents per kwh.

The cost of this wind energy, furthermore, is contractually stipulated to grow by 3.5 percent annually, meaning that it will hit 31.3 cents per kwh in 15 years.

This embrace of renewable energy will leave states with inefficient forms of energy production that will prove costly to residents and incapable of independence in the market. Nevertheless, states seem determined to ignore the oil and natural gas production boom that is taking place, despite the enormous benefits it can bring to their citizens.

A nationwide boom in natural gas production is set to fuel nearly 900,000 jobs and add roughly $1,000 to annual household budgets by 2015, according to a study by a Denver energy research firm.

Many analysts argue that the country has at least a 100-year supply of the relatively cheap, cleanest-burning fossil fuel.

Natural gas prices have plummeted from near $5 per million British thermal units per hour (MMBtu) last summer to around $2.60 per MMBtu.

This boom provides numerous opportunities for job growth and development, along with substantial investment in new technologies. Furthermore, and perhaps most importantly, the oil and gas industries are viable on the market and are not dependent upon government handouts in order to survive. This contributes to the long-term security that these investments constitute.